One of the biggest complaints against government-mandated project labor agreements (PLAs) is that these anti-competitive schemes saddle nonunion and merit shop contractors with inefficient union work rules and high operational costs unique to unionized contractors, which results in reduced competition and increased costs to taxpayers.
Studies have found that these costly inefficiencies, coupled with reduced competition from quality merit shop contractors, increase the construction costs of PLA projects between 12 percent and 18 percent compared to similar non-PLA projects.
PLA mandates prevent qualified merit shop contractors and their skilled craft employees from delivering quality, safe, on-time and on-budget construction projects to taxpayers.
It is important to note that merit shop cost advantages are not achieved by cutting employee pay and benefits or exploiting workers, as is often incorrectly claimed by PLA proponents. Labor costs associated with employee wages and benefits are held constant by state and federal prevailing wage laws that both union and nonunion contractors must follow, regardless of whether a PLA is utilized on a project.
Studies commissioned by union contractor groups and independent research firms confirm that the cost advantages gained by merit shop contractors over union firms are achieved through the efficient management of operational costs and an innovative labor-management technique employed regularly by merit shop contractors called multiskilling.
Union vs. Nonunion Operational Costs
A 2004 Electrical Contracting Foundation study, A Comparison of Operational Cost of Union vs. Non-Union Contractors, was commissioned “to investigate the main differences between unionized electrical contractors (ECs) and open shop contractors, as well as to identify the main cost drivers and how they differ between the two.”
The study is remarkable because of the findings and the fact that it was produced by union interests.
Union signatory electrical contractors through an ELECTRI’21 grant invested in this study because of concerns that “…current measurements of the market share of the signatory contractors, and therefore of the IBEW, show a 30-year decline.”
The study found that:
“…the convoluted expectations and regulations of the labor union are an added cost without providing any added value to the stakeholders. On the other hand, open shop contractors enjoy a higher level of freedom that results in lower cost.”
“Contrary to common perception, the main difference between the two styles of operations is not the labor cost, but rather how the labor is managed.”
To purchase the study, visit http://www.necanet.org/store/products/index.cfm/F2210.
Multiskilling is a labor utilization strategy in which workers possess a range of skills that are appropriate for more than one work process and are used flexibly on a project or within an organization. It has tremendous labor productivity advantages for contractors, but it is forbidden by typical union work rules and, by extension, PLAs.
An April 1998 study, “An Analysis of Multiskilled Labor Strategies in Construction” by the Construction Industry Institute, found:
“Benefits of multiskilled labor utilization were observed with regard to total project labor cost, employment opportunities for construction workers, and other industry labor issues. These benefits included conservative estimates of 5 percent or more total labor cost savings, a potential 35 percent reduction in required project workforce, a potential 47 percent increase in average employment duration, and an increase in wage/annual earning potential for multiskilled construction workers. Productivity improvements were reported by over 75 percent of those surveyed in the study.”
PLAs defer to each local union’s collective bargaining agreement, which reference each local union’s set of work rules that determine how employees in each trade handle specific job tasks. Think of work rules as a job description designed to ensure that union members are not taking the work of other union members in other trades.
Unions claim the purpose of these rigid job descriptions is to ensure quality construction, but in today’s construction marketplace, these work rules are used as an excuse to create as many jobs for as many union members for as long as possible. This is known in the industry as “featherbedding,” or spreading employment by unnecessarily maintaining or increasing the number of employees or the time used to complete a particular job.
For example, a plumber cannot touch carpentry work that may be preventing a plumber from completing a task. That job task belongs to a union carpenter. An electrician can’t move sheetrock without asking a laborer, a painter can’t use a roller wider than 9 inches, etc. These rules slow down productivity, especially if idle labor is not employed efficiently on a jobsite on other tasks, resulting in significant down time and added costs.
Other union work rules call for more workers than are needed for a specific task. These jobs are relics of decades-old collective bargaining agreements that aren’t necessary due to modern technology.
For example, the Buffalo News reported that in the Buffalo, N.Y., metropolitan area, union agreements require task-specific workers for automatic equipment that only needs to be turned on and off (“Featherbedding is highway worker strike’s unsettled issue,” 5/15/05). Some agreements also require “crane oilers,” a job long considered obsolete. Other rules require onsite mechanics for machinery even though that work is conducted by unionized maintenance firms offsite. These are symptoms of the arcane process of adjudicating job descriptions through collective bargaining agreements and union work rules, rather than commonsense and efficiency.
Update Summer 2011
Earlier this year, NY building associations representing contractors signatory to union agreements with numerous trades asked for reforms to inefficient work rules contained in union agreements that increase costs and reduce productivity. They cited changes in work rules outlined in the Regional Plan Association report, Construction Labor Costs in New York City: A Moment of Opportunity, which found that “arcane union work rules, inefficient practices, and featherbedding impose 20 percent to 30 percent in excess costs, leading to dramatic increase in nonunion work on NYC construction sites.”
The study also mentioned that NYC developers complained that NYC PLAs were a failure and delivered little to no promised cost savings:
“Management has been almost universally disappointed with the actual savings achieved—2 to 4 percent rather than the promised 20 percent.”
Let Open and Fair Competition Work
Nonunion contractors have developed strategic advantages in the workplace by streamlining operational costs and using labor more efficiently through multiskilling. PLAs eliminate these efficiencies and prohibit taxpayers and private project owners from getting the best possible product at the best possible price. It’s another reason to oppose PLAs and promote open and fair competition on public and private construction projects.